Chowchilla, Calif. has failed to make its January payment on a bond issued to make expensive renovations to its city hall.

We warned you on Tuesday that city was on the brink and could foreshadow similar cases across the country.

Now Chowchilla has crossed the line.

The 11,000-person town got into this situation through a massive collapse in home prices and bad fiscal management, not least of which was an $8 million city hall project. Earlier this year the city posted a technical default by depleting its bond reserve fund to make a payment. And the outlook isn't good. The next step could be moving city operations into the local police department to save on overhead costs or just disincorporating the city.

Gov. Brown is off to an interesting start. Apparently he has dissolved some positions including the office of the First Lady and the Secretary of Education-- sensibly noting that it duplicated the work of the Board of Education. This is good!!! Unfortunately I gather that he has replaced those members of this board in favor of school choice with those opposed. This is very popular with his supporter, the Teachers Union. Oh yeah, and apparently he wants Prop 13 repealed. This would be a disaster for the Denny household and could well be the straw that breaks our back for staying in CA.==============Odysseus-like, Jerry Brown journeys back to his ancestral home.

Sing in me, Muse, and tell the story of the godlike Jerry Brown,

Who became a political wanderer, skilled in the ways of the campaign,

After he forfeited his father's throne

In an ill-fated bid to take the proud halls of the faraway Beltway.

Begin, Muse, with the electoral rout that drove the son of the infrastructure-rich Pat Brown from his home

When the soft-throated San Diego mayor bested him in pitched battle, and

Made Brown eat small potatoes as he snatched the treasure meant for the Golden's State's lord.

The pop-star-dating pol spent years clinging to his Spartan mattress, his trademark blue Plymouth and even Malathion,

While the much-suffering goddess Minerva looked down at the exploits of those who picked up her shield:

The buttoned-down George Deukmejian, who booted the law-bending Rose Bird from her bench,

Pete Wilson, who told his short-haired troops they were eff-ing irrelevant,

Gray Davis, the gleaming-white warrior who declared that Sacramento was worse than Vietnam,

Even though, Zeus-like, he friggin' kept the lights on,

Until Conan, with his broad arms and flashing savage sword, recalled him.

Having been driven from office, the son of Pat Brown set sail for Japan.

When sated with Zen, he voyaged to Kolkata.

He poured libations for the sick and sat at the feet of the gamma-shaped Mother Theresa.

Buffeted by the fickle gods, he railed against the political machine,

Then he lunged to control that wine-dark apparatus in his yearning to take the helm of the state Democratic Party.

Oh yeah, and apparently he wants Prop 13 repealed. This would be a disaster for the Denny household and could well be the straw that breaks our back for staying in CA.

I agree Prop 13 would be a disaster for my family too. However, I have a hard time explaining to my friends why I pay less taxes.

Let's say my house is worth $750,000 or example.

Because I bought the house some years ago my property taxes (roads, education, city services, etc.) this year are "only" $2500.00.

However, if my next door neighbor buys his house today (let's say same house as mine) he would pay $7500.00 in taxes this year versus my $2500.00.

Yet we use the "same" roads, education, police, fire, etc. Why should I only pay one third of what he pays merely because he bought is housethis week and I bought mine and haven't moved ten years ago?

Further, the same "logic" question is also applicable to commercial properties. Bank of America on their building which they bought many years ago pays a much lower tax than a new bank/business who bought the exact same building next door. Is that fair? Right?

1) If you buy a stock, you don't pay a capital gains tax when its market value goes up, you pay the tax when the gain is acutalized.

2) As a general principle, people should be able to buy a home (or a businessman a place of business) and not be driven out of it because inflation, speculative bubbles, or actual gains raises taxes to where they can't stay. Look for example at what drove the creation of the Prop 13 movement: An inflation driven speculative bubble augmented by the State Supreme Court's Wellenkamp decision voiding due on sale clauses in mortgages. Why should someone have to pay more taxes because of that?!?

Sent by a not always reliable internet friend, but it sounds plausible:

Drive carefully my friends

California Traffic Tickets Fines Effective 01/06/2011

BE VERY CAREFUL OUT THERE!

THE LOS ANGELES TIMES HAS AN ARTICLE ON THE SUBJECT:

"FLOORING IT ON CAR FINES". PASS IT ON TO YOUR FRIENDS AND ACQUAINTANCES!

HUGE California Traffic Tickets Fines Effective 01/06/2011

Please be extremely careful in your driving and car registration & insurancematters. State of California is broke and they are trying hard to squeezeall of us hard to collect money.

Effective immediately, if you do not stop at the red light, be ready to pay$436 in fines or if you pass a school bus with flashing red signals, youwill be charged $616. The state of California is going for blood, so beextra careful in driving, You cannot afford messing with them. I have beenhearing that Highway Patrols are under pressure to issue a lot more ticketsthan last year with at least 30% increase in fines over 2009, so beware ofradar guns, highway and traffic cameras installed everywhere and the tougherenforcement of parking rules.

Just for your info, the next time you park in the handicapped zone, even fora minute, you will be looking at almost $ 1000 in parking tickets , so it'dbetter be worth it.

California needs money, so pay close attention to the rules of the road!

Californians are accustomed to earthquakes, and are resigned to the possibility of another Big One in coming decades. But scientists now say the state also faces the very real possibility of a catastrophic rainstorm so massive that it could do more damage than any earthquake, submerging one in four California homes under floodwaters and causing $300 billion in damage.

Using improved satellite imagery, scientists have identified “atmospheric rivers”—moisture-laden air currents 200 miles wide and 2,000 miles long—flowing from tropical Pacific waters to the West Coast. Periodically, these rivers can conspire to create monsoon-like rainstorms over California in which 10 feet of rain could fall over just a few weeks. Tree-ring data shows evidence of vast floods in California’s past, and in the winter of 1861–62, enough rain fell to create “an inland sea” 300 miles long and 20 miles wide, from north of Sacramento all the way to Los Angeles.

“We think this event happens once every 100 or 200 years or so, which puts it in the same category as our big San Andreas earthquakes,” Lucy Jones, chief scientist of the United States Geological Survey’s multi-hazards initiative, tells Science Daily. Though experts can’t forecast when the next “superstorm” will hit, Jones says, it could well be within current lifetimes.

California Gov. Jerry Brown must rapidly close a $25 billion budgetary shortfall. But right now it seems almost a hopeless task since the state's disastrous budget is a symptom, not the cause, of California's much larger nightmare.

Take unemployment. It currently runs 12.6 percent in California, the nation's second-highest rate. Take livability. A recent Forbes magazine survey listing the most miserable 20 cities in the nation ranked four California municipalities among the index's five worst places to live.

Take education. California public schools test near rock bottom in national math and science scores. Take the business climate. A recent survey conducted among CEOs ranked California dead last for jobs and business growth.

Take taxes. California has the highest gasoline tax in the nation, and its combined sales and local/state income tax rates are among the nation's steepest. California incarcerates the highest number of prisoners in the nation. It costs nearly $50,000 per year to house each one, near the highest per-capita cost in the country.

I could go on, but you get the picture that the newly inaugurated Brown has problems well beyond even a massive budget shortfall..

Perhaps the state's problems are not of its own making, but arise from a deficit of natural riches? Hardly. California has the most fertile soil and most conducive farming climate in the country. Tourists flock to see the beauty of Yosemite, Death Valley and a 1,000-mile coastline. San Diego and San Francisco Bay are among the most naturally endowed harbors in the world. The state is rich in gas, oil, minerals and timber. It has the largest population in the nation at 37 million residents.

OK, but maybe prior generations failed to develop such natural bounty? Again, no. At one time California educators ensured that their tripartite system of higher education was the envy of the world. The Golden Gate and Oakland Bay bridges, along with the Los Angeles freeway system and the complex network of state dams and canals, were once considered engineering marvels far ahead of their time. Visionaries made Napa Valley the world's premier wine-producing center. California's farmers found a way to produce 400 crops and half the nation's fruits, nuts and vegetables, and created the richest food region in the nation. Silicon Valley and Hollywood are still the global leaders in computer innovation and entertainment, respectively.

Perhaps California did not invest in its public workers, skimped on entitlements, and turned away newcomers? Not really. Its teachers and public servants in many comparative surveys remain the highest compensated and best pensioned in the nation. Its welfare system is still the most generous in the nation. Seventy percent of its budget continues to go for education and social services. A state that accounts for 12 percent of the nation's population generously provides for 30 percent of the national welfare load. More than a quarter of the nation's illegal aliens are welcomed into California.

So in truth, the state's problems involve a larger "California philosophy" that is relatively new in its history, one that now curbs production but not consumption, and worries more about passing laws than how to pay for them.

California uses more gasoline than any other state and has the most voracious appetite for electricity. But Californians also enact the most obstacles to producing their own sources of oil, natural gas and nuclear power. State referenda and the legislature have made it the hardest state in the nation to raise taxes and the easiest to pass costly new laws.

The state's mineral and timber industries are nearly moribund. At a time of skyrocketing food prices, more than a quarter-million acres of some of the wealthiest agricultural land in California's Central Valley lie idle due to court-driven irrigation cutoffs -- costing thousands of jobs and robbing the state of millions of dollars in revenue.

Home prices stay prohibitive along the upscale coastal corridor from San Francisco to San Diego, even as millions of acres of open spaces there remain off limits for new housing construction. Most refined Californians who regulate how the state's natural resources are used live on the coast far away from -- and do not always understand -- those earthier people who struggle to develop them.

California does not ask its millions of foreign immigrants to come with legal status, speak English or arrive with high school diplomas, but then is confused when its entitlement and legal costs skyrocket. Billions of dollars in remittances are sent from California to Mexico -- but without the state being curious whether some of the remitters are on some sort of state-funded public assistance.

Somehow, Jerry Brown must not only change the way Californians act, but also the strange way they now seem to think -- convincing the present generation to produce far more private wealth while consuming far fewer public funds. Otherwise, the revenue-strapped and reform-minded governor is little more than a modern Sisyphus -- endlessly pushing his enormous rock uphill, never quite reaching the top.

Yesterday a special election was held to fill the position of State Senator for our district. Alerted by an email from the Tea Party Republican candidate for Assembly who just ran a very good but ultimately losing campaign about the vote (which would otherwise have not even crossed my radar screen) Cindy and I formed an opinion about for whom to vote and went to vote. The poll workers told us that about of about 2,500 potential voters, about 76 had voted.

California has led the nation in so many ways, so it seems fitting that it is now showing the rest of us what the collapse of an overburdened welfare state looks like.

In January, Democrat Jerry Brown returned to the governor's office he left 28 years ago. He assured voters that as a seasoned government hand he wouldn't repeat the mistakes made by his novice predecessor, Republican Arnold Schwarzenegger. Mr. Brown had shown a pragmatic, pro-business streak during the two terms he served as mayor of Oakland from 1999 to 2007. Many Californians hoped that at age 72 Mr. Brown would be the first Golden State governor since before Ronald Reagan without his eye on the presidency—and thus could make tough decisions despite the opposition of entrenched special interests.

The state certainly needs bold action: It faces an immediate $26.6 billion deficit. David Crane, a financial expert who worked for Mr. Schwarzenegger, estimates that the state's public- pension obligations could be as high as half a trillion dollars. California's credit rating is the worst in the country, and it's unlikely to return to pre-recession employment levels until the end of this decade.

Mr. Brown has, at best, a mixed record so far. He won points for keeping a campaign promise and refusing to push for tax increases without having them approved by voters. But his plan to close this year's deficit—with a combination of spending restraint and extensions of temporary tax hikes on income, sales and vehicles—has faltered.

It looks as if the special election to pass this plan, currently scheduled for June 7, will either be delayed or not held at all due to inaction by the Democratic legislature. To get his plan on the ballot, Mr. Brown needs the votes of two Republicans in both the state Assembly and the Senate to satisfy the two-thirds requirement for tax increases. He's unlikely to get official cooperation from the GOP unless he gives on something significant, like pension and regulatory reform. Otherwise, he'll have to target individual Republicans with inducements.

Mr. Brown blames the current impasse on "subversive" Republicans who never met taxes they could support. "Some Republicans want government to break down," he told the Los Angeles Times this week. "They want to blow it up. They're radical. They're not in the mainstream."

But Republicans counter that it's California's bloated government that isn't in the mainstream. "We have 12% of the nation's people, but a third of the welfare case load," GOP Assemblyman Dan Logue tells me. "We have the highest taxes in the nation in many categories, and unemployment that's now higher than Michigan's."

Next month, Mr. Logue will hold a hearing in Texas to learn why so many California companies have relocated to the Lone Star State. He says Mr. Brown could be a hero if he breaks with the public-employee unions that helped elect him and forces them to accept structural reforms in exchange for new tax revenue.

The prospects aren't promising. A group of five Senate Republicans has been meeting with Mr. Brown for weeks. They have suggested the state adopt proposals by the Little Hoover Commission, a cost-saving advisory body, that California create a 401(k)-type defined-contribution pension plan to go along with paring back the defined-benefit plan that government workers currently enjoy.

A new statewide Field poll shows that even liberal voters recognize that pensions must be reined in. It found that two-thirds of Democrats want state and local employees to pitch in more toward their retirement, and a full 50% of Democrats back the Little Hoover Commission's proposal. Republican negotiators are also calling for a relaxation of onerous business regulations and a "hard spending cap" that would restrain future spending increases to inflation and population growth.

The talks stalled this week after Mr. Brown told the Republicans that while he might want to do more, public- employee unions and Democrats are adamantly opposed. Democratic Senate President Darrell Steinberg did say he might consider a temporary spending cap, but only one that lasts as long as the five years that any tax hikes are extended.

That would repeat a fatal error in California history. The state once had a hard spending cap, called the Gann Limit, passed by voters in 1979. It kept California's balance sheet stable for over a decade. In 1990, GOP Gov. George Deukmejian teamed up with unions to narrowly pass a measure that rewrote the spending formulas, effectively emasculating the limit. Had a real Gann limit been in place over the past two decades, California's budget would be balanced now.

Public unions seem dug in against fiscal reform, but Mr. Brown might still corral enough stray Republicans to get his budget package before voters this summer. Yet even with the proposed all-mail ballot he wants to use to gin up turnout, its prospects are iffy. In 2009, two-thirds of California voters turned down an extension of tax increases similar to what Mr. Brown is proposing. Last November, despite Democratic victories up and down the ballot, state voters approved a measure requiring a two-thirds majority for increasing fees, and they rejected a repeal of business tax incentives. Voters even turned down an $18 automobile fee to help keep state parks open.

Should tax increases be blocked from the ballot, or if they're rejected by voters, Mr. Brown pledges to pursue an "all-cuts" budget solution that could devastate services without an accompanying restructuring of state government. The unions may respond with an "initiative war" proposing higher taxes on oil companies, tobacco and commercial real estate. Conservatives may counter with a ballot measure curtailing what unions can spend on politics out of member dues. Some moderates want to revive the findings of a 2009 bipartisan commission that concluded the state needs a simpler, less-onerous tax code.

"There are lots of ideas," says urban analyst Joel Kotkin of Chapman University. "But they all must start with ending policies that have California waging war against its own economy." In other words, Mr. Brown must find a way to get serious about tax reform, spending limits and stifling regulations.

California reelin'Lessons from a place that combines most of the shortcomings of the modern Western state Mar 17th 2011 | from the print edition DON NOVEY does not look like a typical Californian entrepreneur. The grandfatherly, fedora-wearing conservative began his career as a correctional officer at Folsom State prison in the 1970s. But he helped build one of the Golden State’s largest industries.

Thirty years ago, when Mr Novey became president of the California Correctional Peace Officers Association (CCPOA), only 2,600 members walked what he calls “the toughest beat in the state”, and there were only 36,000 inmates in California’s prisons. Now, as Barry Krisberg of Berkeley Law School points out, some 170,000 people are locked up there, and CCPOA has 31,000 members. From the air California can look like an archipelago of prisons.

Mr Novey made CCPOA a dominant force in state politics, and not just by dishing out political contributions in Sacramento, the state capital. He shrewdly formed an “iron triangle” with Republican lawmakers and prison-builders. And he gave it a cause: tougher sentencing for criminals. CCPOA sponsored the “three strikes” law, mandating life imprisonment for three serious felonies, and helped set up victims’ rights groups.

By the time Mr Novey gave up the CCPOA’s presidency in 2002, the state had built 21 new prisons. Some guards now earn more than $100,000 a year (with overtime). Mr Novey negotiated pensions of up to 90% of salary, with retirement starting as early as 50. To many of his members Mr Novey remains a hero—a man who provided good jobs and made them safer. And the taxpayer footed the bill.

Jerry Brown, the Democrat who was recently elected governor, faces a deficit of around $25 billion this year—bigger than the total budget in 1975. That was the year when Mr Brown in his younger “Governor Moonbeam” phase first ran the state. Back then California’s government was widely admired for its highways and its universities, and also as a font of political ideas both on the right (Reaganism) and the left (environmentalism). Now the roads and colleges are crumbling, even though total government spending in the state will reach $230 billion this year (see chart 4). Californian politicians get some of the lowest ratings in the country. Like a paranoid movie star, the state has kept on grasping at miracle cures—from Proposition 13, the tax-cutting ballot initiative, in 1978 to the election of Arnold Schwarzenegger, the cyborg-ex-machina, in 2003.

California is now widely studied as an example of what to avoid. Why is the home of Apple and Google so useless when it comes to running school districts or budgeting, and why have so many clever people settled for such a bad deal? Such questions are worth asking because what happens in California, which is famously like America, only more so, tends to happen elsewhere. And indeed a list of its ailments applies to a greater or lesser extent throughout the Western world.

• A messy structure of government. Look at an administrative map of California and you might assume that a child had scrawled over the design. It is a muddle of thousands of overlapping counties, cities and districts. Beverly Hills and West Hollywood sit in the middle of Los Angeles but are separate cities. The LA school district has 687,000 pupils, but there are 23 others with 20 pupils or fewer. Often voters have little idea what their officials do for their money. Last year the residents of Bell, a poor Latino city of 38,000 people, found their city manager was paid $788,000 and their police chief $457,000 a year.

In Sacramento things are no clearer. Thanks to various voters’ initiatives, as much as 75% of the budget is outside Mr Brown’s control. Proposition 13, which halved and capped property taxes, forced the state to bail out local government. A chunk of the state’s own money comes from the federal government. So cash for health, schools, welfare and much else sloshes backwards and forwards between Sacramento, Washington and various Californian cities. That makes it impossible to hold any Californian politician fully accountable for any part of government.

Some of this stems from specifically Californian afflictions, especially the ballot initiatives. But overlapping areas of responsibility are common throughout the West. In Australia, for instance, the federal government runs primary health care but the states run hospitals. In most European countries taxes are raised centrally but tend to be spent by local or regional government. The European Union increasingly plays the same role that Washington does in America, adding another layer of rules and mandates.

• Out of date. The most recent full redesign of California’s government was in 1879, when the state had only 865,000 people; now it has 37m, and a single state Senate seat represents more people than the whole Senate did then. As California’s pre-eminent historian, Kevin Starr, observes, “it is not surprising that an organisation set up to look after fewer than a million people should have a collective political nervous breakdown when it governs something almost 40 times that size.”

The same argument could be applied to the United States as a whole. Its constitution was designed for a country of 13 states and 4m people, when things like religious tolerance, the right to form militias and preventing people trying to become king mattered a lot. The Founding Fathers had no plans to bring either North Dakota or California into their union, nor could they imagine the ramifications of those two states both having the same voting weight in the Senate even though California’s population is 57 times bigger.

In Europe, thanks in part to two world wars, the state has been redesigned more recently, though many antiquated structures—such as Britain’s House of Lords—have survived. Many of these oddities work well in practice, and Americans revere their constitution. But structure matters. It is hard to think of any successful commercial outfit that has stuck to the same organisational design for 23 years, let alone 230.

• Too much power for vested interests. In “The Logic of Collective Action” (1965), Mancur Olson argued that rational individuals will work hard in a group with a selective aim reserved for its members (prison guards banding together to press for higher wages, for instance); they will expend less energy to push for public goods whose benefits are widely shared. Once entrenched, an interest group is extremely hard to shift. Its members have much to gain by fighting to retain their particular privileges, and would-be reformers have to take on disproportionately large costs to push for a vaguer public good. Californians have moaned about their prison guards’ perks for a while, yet have only recently plucked up the political will to do anything about them.

In rich countries no group has illustrated Olson’s work more clearly than farmers. In California’s Central Valley you can watch Californian tax dollars evaporating before your eyes as farmers guzzle most of the state’s precious water to cultivate crops that were never meant to grow in a desert. In the European Union two-fifths of the budget still goes to agriculture. In Poland farmers are exempt from income tax. Just as with the prison guards, the subsidies keep flowing to farmers largely because of conservative politicians. Although the greediest public-sector unions are firmly allied with the left (see article), the supposedly low-tax right also lavishes money on its own priorities. The new Republican leadership in Washington started its search for waste in the foreign-aid budget by trying to get the biggest recipient of American largesse, Israel, moved to the Pentagon’s budget.

Interest groups work especially well in systems like America’s where money needs to be raised and where party primaries matter. A Republican politician describes how the gun lobby works. If a Republican congressman signs up to the National Rifle Association’s agenda, he gets a little money and some organisational help from vocal supporters. If he does not, the NRA will put a lot of resources behind his opponent in the primary. Going with the NRA is thus a lot easier. Many Democrats would say exactly the same about the teachers’ unions and education reform. Opposing them is not worth the hassle.

Olson’s theory also helps explain why broad-based lobbying by big business has given way to narrower special interests. Fifty years ago California was run by a business elite, keen to keep taxes down and infrastructure spending up but with a broad interest in the well-being of the state. Since then Californian businesspeople have discovered that targeted lobbying can do a lot for their specific business. That has made it harder to get commercial interests to support projects of general benefit such as transport in the Bay area. It has also brought about an increase in regulation as individual businesses have lobbied for rule changes that create barriers to entry for other firms.

• Ever more rules and taxes. A study last year by the Pacific Research Institute said California had the fourth-largest government of all American states, with state and local spending equal to 18.3% of its gross state product. Texas, a state with which California is often compared, chewed up just 12.1% of GSP. It also looked at tax structures, and on that count California came 45th out of 50 states, with its steep income tax being especially damaging. Its tax system has been a mess ever since the dotcom boom when it relied too heavily on capital-gains taxes. As taxpayers have got crosser, the state has tried to tax them as sneakily as possible while adding tax breaks for favoured lobbies.

This points to two endemic problems with government throughout the West. The narrow one is that tax systems are in need of reform. America’s tax code has grown from 1.4m words in 2001 to 3.8m in 2010. Members of the European Union, too, have made their tax systems increasingly complicated—with the heroic exception of flat-tax Estonia. Most economists think taxes should be shifted towards consumption and away from income and investment. But whatever the system, it should be easy to understand.

The broader problem is the growing thicket of regulation—of which taxes are merely the most onerous part. Many of the new laws that have been passed in both Europe and America have admirable aims: better health care, cleaner air, less discrimination against minorities. But as Philip Howard of Common Good points out, they are amazingly cumbersome—Mr Obama’s health bill was over 2,000 pages long—and once on the statute book, they seldom come off again. One solution is to follow Texas’s example and let legislatures meet only occasionally. Another would be to introduce sunset clauses so that all regulations automatically expire after a while.

• The politics of gridlock. Sixty years ago California’s politics were rather cosy. In the early 1950s Pat Brown, Jerry’s father, who was then the Democratic attorney-general, used to share a car from Sacramento to San Francisco on Fridays with Earl Warren, the Republican governor. This year Jerry Brown in his inauguration speech described politics as a primordial battle between “Modocians” and “Alamedans” (Modoc being a rural, conservative Republican county and Alameda a liberal enclave east of San Francisco).

It is fashionable to blame this animosity on the internet and on partisan media channels such as Fox News. But it often has structural causes, such as gerrymandering. California has tended to choose centrists—liberal Republicans or conservative Democrats—in statewide elections, but the legislature’s electoral boundaries have been drawn to produce the biggest number of safe seats. That means primaries are the only real test for most politicians. Here reform may at last be on the way: Mr Schwarzenegger managed to force through an initiative that handed over redistricting to an independent commission.

But at a national level it will be a long time before America has a sensible debate about its budget deficit. George Lodge, a Harvard Business School professor who ran as a Republican against Ted Kennedy in Massachusetts in 1962, argues that many Western countries are now conducting a dialogue of the deaf. Conservatives want to talk about the “macro” vision (a smaller state) but not the “micro” specifics (the unpopular cuts to achieve that). Leftists want to talk about specific micro programmes they want to build up without ever discussing the macro bill for all of them.

• Towards the older middle. Given the fury from the left about bankers and from the right about welfare spongers, you would expect all that extra government spending to have been swallowed by either end of the income spectrum. In fact in California, as in most of the West, the cash has flowed mostly towards those with middle incomes and the old.

Both the rich and the poor do relatively badly out of government. The rich pay for most of it. In California the top 1% by income accounted for 43% of income-tax revenues in 2008 and the top 5% paid 64%. In America as a whole the top 1% paid 38% of federal income taxes and the top 5% paid 58%; their respective shares of national income were 20% and 38%. The wealthy pay the lion’s share in most European countries too. Getting the rich to cough up so much might be a desirable social goal in a time of great inequality, but it is hard to claim that they are not paying their share.

The poor pay virtually no income taxes, and many countries, especially in Europe, have a problem with entrenched welfare dependency. Britain, for instance, has a quarter of a million households in which no one has ever held a formal job. But overall it is not clear that the poor benefit from government transfers and benefits as much as you might expect. In America two-fifths of all “social payments” are made by the private sector through employers’ pension contributions and health plans—both spurred on by tax breaks that go mainly to middle-income Americans.

When you look at overall public spending, the gap widens. Middle-income Californians go to better schools than poor ones do. Their streets often have more policing. They are far more likely to go to a publicly financed university, to claim mortgage relief on their home, to own a farm that collects subsidies or to attend a ballet supported by public funds. Europe is different only in that it subsidises the middle classes less through tax breaks and more through “universal” benefits—things like free bus passes for the old—which often started out being targeted at the poorest but are now given out to all.

That points to another distortion, which is generational. A large number of welfare payments and social transfers are now aimed at the elderly. The huge baby-boom generation that is just about to retire will make these even more expensive. In Christopher Buckley’s political satire, “Boomsday”, America’s young eventually start bribing their self-indulgent parents to end their lives early. In his interesting book “The Pinch”, David Willetts eschews that solution for Britain’s baby-boom generation, but calculates that it will take out nearly 20% more from the system than it has put in. The first budget of the new Tory government, in which Mr Willetts is a minister, still directed money disproportionately towards the old.

Across the rich world, politicians keep on pushing money towards the middle class and the old because that is where elections are decided. People aged 65 and older still account for only 13% of America’s population, but they made up over a fifth of its electorate in 2010. No group is better organised: the AARP (formerly the American Association of Retired Persons) has 40m members.

• The secession of the successful. Hollywood, Silicon Valley or any of the other places where successful Californians gather show a profound contempt for their government. At the most extreme, such people have walled themselves off in gated communities, with their own security, health services and even schools. Their main relationship with the state, at least as they see it, is to write a cheque for their taxes—and their only interest in it is that the cheque be as small as possible. Philanthropy continues, but remarkably little goes into beautifying their environment (Silicon Valley is the ugliest industrial cluster imaginable).

Similar complaints can be heard in other centres of elitism: Wall Street does not do much about the Bronx, and the City of London usually ignores the East End. Both globalisation and the internet have increased this sense of separation. Companies with strong local links have been swallowed up by larger groups. Wells Fargo used to be a powerful force in San Francisco and Security Pacific in Los Angeles; both are now part of bigger empires. The Indian tycoons in Palo Alto feel closer to Bangalore than they do to Bakersfield (and so do many of their American colleagues).

This secession has an effect on government. It makes capital, as well as businesses and talented people, more footloose, so it becomes harder to raise taxes overtly. Worst of all, the secession of the successful means that the most talented brains are largely left out of the mix. One leading California Democrat describes the list of businesspeople prepared to run a public commission as “painfully short”.

• You, yes you, are to blame. California is interesting for one final reason. Throughout most of the West, people are in denial about the consequences of wanting both more government and lower taxes. In California ballot initiatives have actually given voters a direct say. Generally they have made government worse, protecting bits of spending yet refusing to pay for it. Having voted for Mr Schwarzenegger in 2003, they deserted him the moment he tried to introduce structural reforms in 2005.

Interviewed shortly before his exit at the start of this year, the gubernator had two thoughts. One was that his successor would find reform easier because the system is more manifestly bust now than it was in 2003 (and Mr Brown is certainly having a go). The other is that Californians are still determined to get something for nothing. “People here are addicted to improving their lifestyle. They want more and more from their government.”

Is there a better way? Many of those who used to see the future in the Golden State now prefer to look across the Pacific—towards emerging Asia.

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"If you have been reading Reason about the pension calamity in the works, read this report, because it's worse than Reason has been saying," commenter johnl wrote the other day when I briefly mentioned a new report on hijinx at the California Public Employees' Retirement System (CalPERS).

I hear you, johnl! I discussed the report on CalPERS’ use of placement agents with Chris Reed the other day and first reported on this story last summer. But you may want to take a look at the full report before the week is out. Produced at CalPERS’ request by Philip S. Khinda of the D.C. law firm Steptoe & Johnson, it's a striking view of the type of people the nation's largest pension fund and second largest buyer of medical care (after the federal government) attracts to its top positions. CalPERS has the report [pdf] on its site, and the L.A. Times has an annotated version.

The focus of the report is former CalPERS CEO Federico Buenrostro's very energetic campaign to drive CalPERS investments to clients of the placement agent Alfred J.R. Villalobos. Placement agents function more or less as lobbyists, providing money managers with access to people like Buenrostros and the big institutional money they represent.

The wining and dining of Buenrostro and other CalPERS bigshots included the usual battery of hospitality, hosted events, bottles of wine, casino chips, junkets, and a revolving-door job when Buenrostro finally got fired in 2008. The breakout supporting player is Chuck Valdes, a CalPERS board member and serial deadbeat who was unable even to obtain a credit card yet still managed to score trips abroad, a fancy hotel at an Apollo Global Management event in New York, and tickets to the Oscars two years in a row. He didn't even submit receipts.

What did private equity firms -- Apollo, Ares Management, Relational Investors, and others -- get for all this charity?

That part isn't so clear. The real scandal here may be how little value all this influence peddling delivered for Villalobos' paying customers. In fact, part of the reason the Villalobos/Buenrostro scheme unraveled is that Apollo's top lawyer insisted on better disclosure of Villalobos’s role as a middleman – to CalPERS itself. (Don't worry: As part of a new set of reforms, Apollo is being punished for its troubles. )

Caveat lector: On the general topic of actual or apparent conflict of interest by stewards of the public trust, my morality is probably more flexible than your own. It all comes back to the Senate Candy Desk, and the fiction that society can put up some kind of fence to separate raping from pillaging. I would be ashamed to take seriously the idea that you can put officials in charge of multi-billion-dollar public fortunes – all of it by definition taken by force from productive and law-abiding citizens – then expect those officials to behave well because they’re not allowed to accept gifts valued above some arbitrary two-digit dollar figure. As the great libertarian Russell Means once told me, “Of course they steal. That's what they're taught.” If I were Buenrostro’s flack he’d be the hero of this story because on his way to the Gulf junket he apparently flew coach.

So the unsurprising joke is that none of this misrule seems to have made a difference to CalPERS’ excellent investment returns – which have averaged in the 7 percent-to-8 percent annual range for the last two decades. The pork-related damage may have been minimal because the mischief was mostly limited to the fund’s private equity division – which right now makes up only 13.7 percent of CalPERS’ total fund. But the private equity portion alone also seems to have prospered over the last decade, growing from $7 billion to more than $31 billion, according to the report. “We understand,” Khinda writes, “that the fund investment that was made has, to date, fared well.”

High-flyers like Apollo weren’t so much paying to play as paying to block competition and avoid displeasing senior officials at one of the most important players in the U.S. capital market. Most of them had long-established and successful relationships with the fund. They just didn’t want to take a chance on screwing that up. Of course they paid. That’s what they’re taught.

Khinda makes the case that, while the investment performance may have been good, the fees private equity firms charged CalPERS (in some cases while also serving as external managers in partnership with CalPERS – a role with fiduciary duty) may have been higher than what they could have extracted without the leverage of placement agents. But there’s no dollar estimate on that. In any event, that’s how CalPERS intends to solve the problem. Apollo and other firms have already agreed to reduce their fees by $215 million, and Khinda’s recommendations include a move to success-based fees only for external managers in the future. Federal and state investigations are still going on. Several other higher-ups at the fund followed Buenrostro out the door, and CalPERS assures the public all the bad apples in this isolated incident have been removed.

Buenrostro’s antics are entertaining, and you’ll definitely want to check out the narrative from pages 24 to 28 detailing his pasting together of amateurish disclosure forms with fake CalPERS letterhead and “typographical and language errors that one would not expect to see on an easily-reviewed, one-page form purportedly relating to a $1 billion investment transaction.” But some of the evidence against him is, literally, he-said-she-said from his ex-wife and ex-girlfriend.

What stands out isn’t special venality but garden variety political thinking. When Buenrostro pressured the investment staff to give business to Villalobos client Aurora Capital Group, he didn’t make the case that they were successful investors but that Aurora partner Gerald Prosky had recently been named to a state commission. When investigators questioned him about his interference with investments, Buenrostro claimed “his involvement was limited to investment priorities that interested him (environment, diversity and healthcare, for example).” Win the future does any of this have to do with investing? Let’s leave aside the comedy value in seeing CalPERS – which has gotten years of good press for its showboating about “corporate governance” – revealed as the swamp in which Buenrostro and Villalobos grew. The job of a CEO with a quarter-trillion-dollar pool of money is not to make political points or salve his own conscience. He’s there to make the pile of money grow as fast and as large as possible.

But maybe that shouldn’t be the case. Like all too-big-to-fail institutions, CalPERS is a creation of the government. In retrospect, the 1984 decision to give the fund unlimited access to the capital markets was a mistake. CalPERS laid waste its handsome returns with excessive payouts. And as the sad story of the lobbying money managers makes clear, the capital markets suffered too, from having to please another oversized player. If you want to solve this problem you can put CalPERS back into super-safe government debt investments (to the extent even those still exist in the future), and let California’s government employees lower their sights just as those of us in the Social Security system have to do. Or you can accept that influence peddling must occur when the government is paying. But you can’t give people more money than God and expect them to act like saints.

Wisconsin's public union fight is the battle of the century in American politics. But while the governors of Wisconsin and Ohio have led the pushback, it's possible that the public-pension battle could shift in the future to California—with or without the participation of its governor, the endlessly recyclable Jerry Brown. Even in this bluest of states, the ground is shaking beneath the unions.

California—a state that spent the 20th century exploding with creativity, growth and wealth—now staggers beneath a $26 billion deficit. But city officials across California, already staring into their own fiscal abyss, aren't waiting for help from hapless Sacramento.

Costa Mesa, in Orange County, just fired half of its work force. Days later, Los Angeles reached a tentative deal in which workers would pay more into pension and health plans. The next day, thousands of L.A. unionists marched against an array of perceived enemies—Wisconsin, corporations, Republicans.

Then there's San Francisco, about the last place in California you would expect to find an official determined to fight the financial weight of its public unions. Even legal thriller-writer Scott Turow couldn't make this up, but the man taking on the unions in San Francisco is its Public Defender, Jeff Adachi.

Mr. Adachi, 52, runs an agency of lawyers who provide legal services to poor people. He is a card-carrying San Francisco Democrat. As he sees it, payments for public pensions and health care are defunding the world he believes in.

"I'm seen as a liberal progressive, a rage against the machine person," he said this past week at his offices downtown. "If you care about social programs or the network of support services, you have to understand that pensions and benefit costs are crowding out all these services."

As a public official, there was nothing he could do about it. So in a kind of Batman moment, Mr. Adachi as a private citizen got up an initiative last year, Proposition B, which would have required current workers to pay more toward pension and health-care costs.

He got financial support from a prominent local Democrat, Mike Moritz of Sequoia Capital. California's most famous living Democrat, former Assembly Speaker and San Francisco Mayor Willie Brown, supported him. He collected 76,000 signatures. In November, Prop. B lost by 13 points beneath a mudslide of public union money. Mr. Adachi is retooling his proposition for another vote this November.

Daniel Henninger discusses that serious Californians, on the right and the left, know how much fiscal trouble they're in..Podcast: Listen to the audio of Wonder Land here. .It's possible to look at California as the land that time forgot, a place incapable of real reform. But it's also possible that the stubborn pluck that built California is being rediscovered, and in unlikely places.

A few weeks ago, a small group of current and former municipal officials and taxpayer advocates in the San Francisco Bay Area convened to form California United for Fiscal Reform.

Its co-chairs are Mr. Adachi and Stephanie Gomes, the outspoken city council member from Vallejo, famously the largest California city to declare Chapter 9 bankruptcy. Their first meeting this month attracted representatives from Menlo Park, Pleasanton, Contra Costa County, and Sonoma County.

"These costs are a tsunami," says Ms. Gomes. "If we can't rely on the state to fix it, we have to do it locally, and we have to join together, because the unions are joined."

In Orange County, the California Foundation for Fiscal Responsibility and the Pacific Research Institute recently held a "Pension Boot Camp," where some 175 elected officials and others heard talks such as, "What hasn't Calpers told you?"

What Calpers, the state's public-employee retirement system, has told the cities is that many of their pension payments are constitutionally mandated. That means the lead on major reform would have to come from the mercurial Gov. Brown. He talked about it in his campaign, but not much since.

High-level help for the embattled locals, however, may come from another California official, U.S. Congressman Devin Nunes. Rep. Nunes is building support for his Public Employee Pension Transparency Act, which would require states and municipalities to produce a coherent picture of their pension obligations. Imagine that. The bill says that they can stay opaque if they wish, but failure to disclose would cut them off from the federal tax exemption for muni bonds.

Serious Californians know how much trouble they're in. Last June, the Civil Grand Jury in San Francisco issued a report on pensions, "The Billion Dollar Bubble." Its conclusion: "This report is a warning of a deepening crisis in the City's financial condition. . . . We cannot wait."

A report last month from the state's respected Little Hoover Commission said that California has no choice but to take on the edifice of court decisions mandating pension costs to nowhere.

Every person I talked to in California about this issue, from left to right, agrees they have a common problem: Over the years, the public unions "bought" politicians from the smallest city to the state capital in Sacramento. California is a blue state all right, but it just may be that it is turning blue with rage at the inexorable destruction of its public life.

We are launching efforts in California to pick up more Congressional Support. Success and strength will achieved through growing our numbers. Being strong in all 53 of our congressional districts will carry the day. You are invited to join us on a Telephone Conference Call on Wednesday, April 13th, at 7:00 pm. Dial-In Number: (610) 214-0000

Access Code: 960846

This call will provide us with an opportunity to meet and greet, and discuss efforts we are making in the districts to promote Fair Tax. We would of course like to discuss areas where we can help and support. We look forward to hearing from you.

Yours in the cause,John Wesley NoblesCA Volunteer State Director

Click here to visit the homepage for this group

If the text above does not appear as a clickable link, you can visit the web address:

****California's RepublicansDead, or just resting?The threat of demography Apr 7th 2011 | LOS ANGELES | from the print edition THE Republican Party in California is “already dead. We’re talking about whether it can be revived,” says Allan Hoffenblum, who was a Republican official and consultant for four decades and now produces non-partisan electoral analysis. He is among a growing number of mainly old-fashioned Republicans who think that their party has got on the wrong side of a huge demographic trend, the growth of Latinos and Asians.

This shift forms the backdrop as Republicans and Democrats play chicken with the state budget in Sacramento, rather as their national counterparts are doing with the federal budget in Washington, DC. In both places, all involved are hoping the other side gets more blame when budget negotiations fail.

But Washington’s Republicans are still testing the power they won in November. Sacramento’s, by contrast, are fighting for survival after a season of epic reverses. All eight statewide offices went to Democrats in the last election. And after falling for decades, the percentage of Californian voters who are registered Republican is now less than 31%, far below the 44% who are Democrats and not far above the 20% who decline to state a preference.

Related topicsSacramento, California Social and behavioral science Science and technology Demography World politics Duf Sundheim, chairman of California’s Republican Party between 2003 and 2006, says that the main trend behind these numbers is the disenchantment with both parties, reflected in the rise of unaffiliated voters. But the damage has not been symmetrical. For although the Democrats have their crazies—largely of the green or unionised sort—they have also picked up most of the rising Latino and Asian political talent. And they tend to be moderate, or even conservative. This may help explain why independent voters in California lean Democratic in elections.

Mr Hoffenblum minces no words about what caused this loss for Republicans. It is the “shrillness” of their rhetoric against illegal immigrants, which has “totally turned off Latinos and Asians in this state,” even those who are citizens or legal immigrants. In effect, he says, the Republicans have made themselves “the white man’s party” and “alienated the fastest growing voting block.”

Ahead of the nation in the demographic shift from white to brown, California may thus be a warning for Republicans elsewhere. Already, places like Orange County that used to be very white and reliably Republican are becoming less so as they grow more ethnically diverse. The biggest change is occurring in inland regions such as the Central Valley. After the 2000 census, when both parties shamelessly gerrymandered legislative districts, the Republicans carved out several safe, white rural districts. Since then, the population has grown fast in these areas, but that growth has been among Latinos. So Republicans might actually lose from the trends that have favoured their regions.

So far, they show no sign of acknowledging this. At a recent party convention, the main topic was not how to reach out to independents or Latinos but how to get around new rules for non-partisan primaries that might favour moderates, and how to discipline “traitors” who dared negotiate with the Democratic governor. Mr Sundheim says it’s time to get the board in the water in time for the wave.****

It was L.A.'s gang culture that killed trendy Westwood Village when a 27-year-old was shot in 1988. Will a recent brutal attack kill a legendary L.A. stadium too?

April 12, 2011 - by Jack Dunphy

In a big city, most crime victims suffer in obscurity. In Los Angeles last year, police investigated 21,241 violent crimes, including 297 homicides, yet who outside their own circle of family and friends could name even a single one of those victims?

But sometimes a crime occurs in such a manner or in such a place that it comes to gain far wider significance than one victim’s misfortune. In 1964, Kitty Genovese was raped and stabbed to death outside her Bronx apartment. Many of her neighbors heard her screaming, yet no one came to her aid and only a few even went as far as to call the police. Her murder is still cited as being symbolic of large cities where people remain unknown to their neighbors and indifferent to their troubles.

In 1988, Karen Toshima, a 27-year-old graphic artist, was shot to death in Westwood Village, an area of shops, restaurants, and movie theaters adjacent to the UCLA campus. Toshima was walking on the sidewalk with a friend when two groups of rival gang members squared off. One of the gangsters pulled a gun and fired two rounds, missing his intended target but hitting Toshima in the head. She died the next day.

Toshima was one of the 736 people murdered in Los Angeles that year, a time when gang violence was on the rise and no one, it seemed, knew what to do about it. It’s fair to say that her death was a catalyst to the battle against L.A.’s gangs, whose violence had until then been confined to the city’s less upscale neighborhoods.

Will Bryan Stow be the Karen Toshima of 2011?

On March 31, Stow, a 42-year-old man from Santa Cruz, Calif., went to L.A.’s Dodger Stadium to attend the opening-day game between the Dodgers and his favorite team, the San Francisco Giants. Near the end of the game, apparently after assessing the behavior of some of the people in the stands, Stow sent a text message to a relative to say he feared for his safety. A paramedic by trade, Stow is a man we may presume doesn’t frighten easily, and indeed his fears were tragically borne out. After the game, as he and two companions walked through the parking lot in search of a taxi, they were set upon by two men who pushed Stow to the ground before beating and kicking him into a coma.

Unlike Karen Toshima, Stow has, at least for now, survived the attack, though he remains in a coma at Los Angeles County-USC Medical Center. But like Toshima, his misfortune at the hands of uncivilized thugs has galvanized the city and shone a spotlight on a problem that has been festering for years.

When Karen Toshima was murdered in 1988, Westwood Village was perhaps the only place in Los Angeles where people from all over the city came into contact with one another. People from the nearby Westside mingled with Angelenos from the San Fernando Valley and from neighborhoods to the south and east as they dined, went to the movies, or simply hung out. Sadly for Toshima, this eclectic mix included gang members from South Central L.A., one of whom brought along a gun he was willing to use on scant provocation.

That bullet didn’t just kill Karen Toshima; it killed Westwood Village. Though gang violence had been on the rise in Los Angeles for years, for most people in the city it remained little more than an abstraction, something that only occurred “down there” and among “those people.” But with Toshima’s murder that violence escaped the rough neighborhoods where it could be easily ignored by the city’s elites. Suddenly even Westwood Village, in the very center of one of the wealthiest neighborhoods in the country, was regarded as unsafe. It wasn’t long before the once-thriving Village became, if not quite a ghost town, a place to be avoided. And even now, 23 years later, the vacant storefronts along Westwood Boulevard offer testimony that it has yet to fully recover.

What California needs is more spending on social programs, education, drug treatment, medical care, food stamps, medicaid, unemployment support, illegals, liberal celebrities, support for single mothers, deadbeat dads, and hollywood celebration of criminals, out of wedlock children, and a culture of dependency. You guys need more Crats, more spending, and more taxation.

"That bullet didn’t just kill Karen Toshima; it killed Westwood Village." And... "It wasn’t long before the once-thriving Village became, if not quite a ghost town, a place to be avoided."

What is he talking about? Westwood Village adjacent to UCLA is a thriving small affluent suburb. You can't find parking and it's always crowded. Karen Toshima's death was shocking;but after a couple of weeks in 1988 after her death, Westwood was and still is packed especially on the weekends.

Bryan Stow's attack at Dodger Stadium was tragic; truly tragic. I remember Packer - Viking games or Packer - Chicago games. Of course visitors were ribbed and rude comments were tossed out, butI don't ever remember violence; maybe, and I don't even remember, a tossed beer or a fistfight or two, but never anything truly violent.

But like Toshima's death, I don't think long term, after the politicians and McCourt (please - I wish he would just leave town) finish positioning; in a month or so I expect no lasting impact.

I read the link before I posted; he's wrong. For years I've gone to Westwood and I have friends living in the surrounding area.The place is booming; it's one of the most crowded and busy areas in LA albeit the economy has sorely affected this area too, butexcept for a few short months immediately afterwords, it's "demise" has had nothing to do with Toshima's death. Her tragic death was an aberration, having little to no impact on Westwood.

As for Dodger Stadium, the Dodgers were number one in attendance in MLB 2011 despite their poor team and noted "violence" problems.

That said, gang violence IS an issue in the greater Los Angeles area that needs to be addressed. But it's not easy...

As a side note, last year a client of mine lost a young female employee (shot dead) at a bus stop in a reasonably nice area (not as nice as Westwood)because like in the Toshima case, the gang couldn't shoot straight. I almost don't care if they kill each other, but I hate it when thencan't even shoot straight and therefore kill innocent bystanders.

A couple of articles about the fiscal problems facing California and implications for the world. The Econimist writers imply that California's main problem is "extreme Democracy" as they call it. That California's bent for ballot initiatives wherein voters have too much control over the purse strings (legislatures control only 30% of budget.) I find the Economist seems to miss the entire point about a welfare social state as being the main cause of the budget problems in California. And that is why the Economist is always suspect as a liberal rag to me.

They claim the issue is ignorant misinformed or uninformed voters are making huge mistakes and essentially do not know what is best for them. I claim this is misleading and progressive propaganda. The real issue is too many people and their bribed officials voting too much spending on themselves. In any case:

***Lessons from CaliforniaThe perils of extreme democracyCalifornia offers a warning to voters all over the world Apr 20th 2011 | from the print edition

CALIFORNIA is once again nearing the end of its fiscal year with a huge budget hole and no hope of a deal to plug it, as its constitution requires. Other American states also have problems, thanks to the struggling economy. But California cannot pass timely budgets even in good years, which is one reason why its credit rating has, in one generation, fallen from one of the best to the absolute worst among the 50 states. How can a place which has so much going for it—from its diversity and natural beauty to its unsurpassed talent clusters in Silicon Valley and Hollywood—be so poorly governed?

It is tempting to accuse those doing the governing. The legislators, hyperpartisan and usually deadlocked, are a pretty rum bunch. The governor, Jerry Brown, who also led the state between 1975 and 1983, has (like his predecessors) struggled to make the executive branch work. But as our special report this week argues, the main culprit has been direct democracy: recalls, in which Californians fire elected officials in mid-term; referendums, in which they can reject acts of their legislature; and especially initiatives, in which the voters write their own rules. Since 1978, when Proposition 13 lowered property-tax rates, hundreds of initiatives have been approved on subjects from education to the regulation of chicken coops.

This citizen legislature has caused chaos. Many initiatives have either limited taxes or mandated spending, making it even harder to balance the budget. Some are so ill-thought-out that they achieve the opposite of their intent: for all its small-government pretensions, Proposition 13 ended up centralising California’s finances, shifting them from local to state government. Rather than being the curb on elites that they were supposed to be, ballot initiatives have become a tool of special interests, with lobbyists and extremists bankrolling laws that are often bewildering in their complexity and obscure in their ramifications. And they have impoverished the state’s representative government. Who would want to sit in a legislature where 70-90% of the budget has already been allocated?

Related topicsCalifornia United States Elections and voting Government and politics Politics They paved paradise and put up a voting booth

This has been a tragedy for California, but it matters far beyond the state’s borders. Around half of America’s states and an increasing number of countries have direct democracy in some form (article). Next month Britain will have its first referendum for years (on whether to change its voting system), and there is talk of voter recalls for aberrant MPs. The European Union has just introduced the first supranational initiative process. With technology making it ever easier to hold referendums and Western voters ever more angry with their politicians, direct democracy could be on the march.

And why not? There is, after all, a successful model: in Switzerland direct democracy goes back to the Middle Ages at the local level and to the 19th century at the federal. This mixture of direct and representative democracy seems to work well. Surely it is just a case of California (which explicitly borrowed the Swiss model) executing a good idea poorly?

Not entirely. Very few people, least of all this newspaper, want to ban direct democracy. Indeed, in some cases referendums are good things: they are a way of holding a legislature to account. In California reforms to curb gerrymandering and non-partisan primaries, both improvements, have recently been introduced by initiatives; and they were pushed by Arnold Schwarzenegger, a governor elected through the recall process. But there is a strong case for proceeding with caution, especially when it comes to allowing people to circumvent a legislature with citizen-made legislation.

The debate about the merits of representative and direct democracy goes back to ancient times. To simplify a little, the Athenians favoured pure democracy (“people rule”, though in fact oligarchs often had the last word); the Romans chose a republic, as a “public thing”, where representatives could make trade-offs for the common good and were accountable for the sum of their achievements. America’s Founding Fathers, especially James Madison and Alexander Hamilton, backed the Romans. Indeed, in their guise of “Publius” in the “Federalist Papers”, Madison and Hamilton warn against the dangerous “passions” of the mob and the threat of “minority factions” (ie, special interests) seizing the democratic process.

Proper democracy is far more than a perpetual ballot process. It must include deliberation, mature institutions and checks and balances such as those in the American constitution. Ironically, California imported direct democracy almost a century ago as a “safety valve” in case government should become corrupt. The process began to malfunction only relatively recently. With Proposition 13, it stopped being a valve and instead became almost the entire engine.

You don’t know what you’ve got till it’s gone

All this provides both a hope and a worry. The hope is that California can right itself. Already there is talk of reform—though ironically the best hope of it may be through initiatives, since the push for a constitutional convention died last year for lack of money. There is talk, too, of restoring power and credibility to the legislature, the heart of any representative democracy. That could be done by increasing its unusually small numbers, and making term limits less onerous.

More important, direct democracy must revert to being a safety valve, not the engine. Initiatives should be far harder to introduce. They should be shorter and simpler, so that voters can actually understand them. They should state what they cost, and where that money is to come from. And, if successful, initiatives must be subject to amendment by the legislature. Those would be good principles to apply to referendums, too.

The worry is that the Western world is slowly drifting in the opposite direction. Concern over globalisation means government is unpopular and populism is on the rise. Europeans may snigger at the bizarre mess those crazy Californians have voted themselves into. But how many voters in Europe would resist the lure of a ballot initiative against immigration? Or against mosque-building? Or lower taxes? What has gone wrong in California could all too easily go wrong elsewhere.

Back in the 70s the Economist was a superior publication, but IMHO it now has deteriorated into smug elitism. This article is the now usual mix of perceptive comments and pompous elitist commentary.

Amongst the many things missed are

a) the consequences of gerrymandering which have created a one party state-- the incumbent party. I must give Schwarzenegger considerable credit for his part in bringing this to a close. With the most recent census and the district lines no longer drawn by the incumbents, there may be hope for genuine democracyb) the distinction between a republic and a democracy. The United States is a republic, not a democracy, and for durn good reason-- unbridled democracy leads to demogoguery and tomfoolery of the sort we the idiots of CA have voted in via initiative.

Life is tough, and it is tougher when you are stupid. California has been stupid.

I would like to see one that shows when Californians began to understand why they still have 12% unemployment. Seems they have not yet discovered the law of holes - when you find you're in one, stop digging.

Meg Ryan was an absolutely terrible and completely unprincipled candidate and lot of people simply wanted to bitch slap her for her attitude that she could buy the election. This is not entirely a bad thing.

There are other laws which we here in CA need to learn. For example, just as you cannot repeal the law of gravity, you cannot repeal the law of supply and demand. Nor is there such a thing as a free lunch.

First a context. When America was the greatest nation, California was the greatest state. Calif still is and always I suppose will be the most important state. There is no perfect fix for the nation that doesn't include turning things around over on the left coast.

The verdict is still out on the political staying power of Wisconsin Governor Scott Walker's collective bargaining and other reforms. But if the opinion of American business counts for anything, he's already helped the Badger State.

Chief Executive magazine recently completed its annual survey of CEOs on the best and worst states for business. The 500 CEOs graded the states on taxes and regulation, the quality of the work force and living environment, among other categories. Wisconsin made the biggest jump of any state, and one of the largest in the history of the survey, rising to 24th from 41st in 2010 and 43rd in 2009. Louisiana continued its rise, moving up 13 spots to 27th on the basis of its improvements in tax climate and deregulation. Indiana moved up 10 spots to sixth.

The Wisconsin jump is especially notable because Mr. Walker and a new GOP legislature only took office in January. This suggests that Big Labor's attempt to make Mr. Walker a national political target had the ironic result of making Wisconsin more appealing to business executives. "Indiana and Wisconsin's governors have been outspoken about wanting to be more business friendly," says Chief Executive director for digital media Michael Bamberger.

CEOs don't make investment decisions based solely on such impressions, but they can get a state a hearing it might not have previously received. Wisconsin still ranked 33rd among all states for taxation, and its grades on other categories didn't change radically. But a company's relationship with employees was also on CEOs' minds. "Rules that make it hard, if not impossible, to separate from a non-productive employee make companies fearful to hire or locate in a state," one CEO wrote.

Texas led the survey for the seventh straight year, followed by North Carolina, Florida, Tennessee and Georgia. As for the five worst states, you will not be surprised to learn that they are, in descending order, Michigan, New Jersey, Illinois, New York and California. Tax-raising Illinois has dropped 40 places in five years and, as the magazine puts it, "is now in a death spiral."

The federal Department of Transportation has offered $3 billion of stimulus funds with the catch that the state has to begin construction by 2012 and build the first segment in the Central Valley. A stand-alone segment running through a sparsely populated area couldn't operate without a huge taxpayer subsidy, but a voter-approved ballot measure explicitly prohibits any such subsidies.

At the urging of the state watchdog, the rail authority asked the feds for more flexibility about where and when to start building. Last week the Department of Transportation told them to dream on. In a letter responding to the request for more flexibility, Under Secretary for Policy Roy Kienitz ordered the authority to charge full speed ahead since "once major construction is underway and approvals to complete other sections of the line have been obtained, the private sector will have compelling reasons to invest in further construction." Private sector seems to be the Obama Administration's code for government.

Even some of the state's Democrats are protesting the Administration's mulishness. Democratic state senator Alan Lowenthal told the Los Angeles Times that "there is nothing in the letter saying the federal government would commit $17 billion to $19 billion for the project . . . If it had, we would build the Central Valley segment right now. But the state needs to be financially and fiscally responsible."

Which is why the legislature needs to kill the train now. Once this boondoggle gets out of the station, the state will be writing checks for decades.

As someone who doesn't like to fly, at least locally, especially after 9/11 due to the wait and delays,a high speed rail system has some appeal. I go to Japan often on business. I never take planes onceI'm there; the high speed trains are superb. Not cheap, but the comfort, the speed, and the convenienceis very appealing. One can criticize the cost of subways being built in LA, you can criticize the cost of Metro Linkconnecting nearby cities by train to downtown LA, but frankly, I think it's about time. It costs money inthe short term, but long term I think CA will be better off.

SAN FRANCISCO—California's embrace of an independent commission to redraw legislative districts got its first big test Friday as a newly released map of proposed boundaries drew criticism from Republicans and a prominent Latino group.

Many Republicans complained that the proposed new districts would make their party even less competitive in a state already dominated by Democrats. Nineteen of California's 58 congressional districts are held by Republicans while Democrats hold both Senate seats, almost all elected statewide offices and near-full control of the Legislature.

Under the proposed new lines unveiled by the California Citizens Redistricting Commission, legislative districts would have a more compact shape, with few dividing cities or taking snakelike paths to connect similar voting blocs.

Some currently Republican state and congressional districts would be redrawn to include parts of ones now held by Democrats—potentially setting up an election between incumbents that could make it tougher for the GOP member to be re-elected, said Tom Del Beccaro, chairman of the California Republican Party.

"You can make the argument that this has improved the chances of the Democrats statewide, which I don't think is what the voters had in mind," Mr. Beccaro said, referring to ballot initiatives in 2008 and 2010 that took the job of redrawing political boundaries in California out of the hands of the Legislature. California and Arizona are the only states where congressional districts are determined by independent panels. The California commission also is redrawing state legislative districts.

The chairman of the California Democratic Party, John Burton, said he couldn't comment on the map until he had the opportunity to study it further.

Another potential sore point among some voters will be that many districts in heavily Latino areas are being redrawn, said Bruce Cain, a political science professor at the University of California, Berkeley. The biggest changes to congressional districts are occurring in areas including eastern Los Angeles County and San Bernardino County, he said, where the Hispanic population has grown rapidly over the past 10 years.

But Latino activists point out that despite their population gains, they are getting no new congressional districts. That is due in part to the fact that California—for the first time since statehood—received no added district under the 2010 census because its population didn't grow enough.

The Mexican American Legal Defense and Educational Fund had requested the number of districts representing mostly Latino areas grow from seven to 11, but it has stayed at seven. "We have extremely serious concerns about that," said Steven Ochoa, a spokesman for the Los Angeles-based advocacy group.

But commission members said they prepared the map with no biases, using only federally mandated criteria such as making sure districts were of equal population. They also said they depended on extensive input from residents at 23 public hearings.

"Our job is to come up with a legal plan and base it all on public testimony," said Cynthia Dai, a commissioner from San Francisco. The maps released Friday will be subject to more hearings before they are finalized Aug. 15.

If California's new redistricting system succeeds, it likely would be followed by other states, Mr. Cain said. He added a likely byproduct from the new California maps, if they hold up, would be heightened competition in congressional races that are now mostly shoo-ins for incumbents. He estimated as many as a third of the districts would be competitive in 2012.

California currently ranks #49 among U.S. states for "business tax climate" (Tax Foundation) and #48 for for "economic freedom" (Mercatus). It shouldn't be any surprise then that companies are leaving the "Golden State" in record numbers this year (see chart above) for "golder pastures" and more business-friendly climates in other states.

From Joe Vranich:

"Today, California is experiencing the fastest rate of disinvestment events based on public domain information, closure notices to the state, and information from affected employees in the three years since a specialized tracking system was put into place. Out-of-state economic development officials are traveling through the state to alert frustrated business owners and corporate executives to their friendlier business climate versus California's hostility toward commercial enterprises.

•From Jan. 1 of this year through this morning, June 16, we have had 129 disinvestment events occur, an average of 5.4 per week (see chart above). •For all of last year, we saw an average of 3.9 events per week.•Comparing this year thus far with 2009, when the total was 51 events, essentially averaging 1 per week, our rate today is more than 5 times what it was then.Our losses are occurring at an accelerated rate. Also, no one knows the real level of activity because smaller companies are not required to file layoff notices with the state. A conservative estimate is that only 1 out of 5 company departures becomes public knowledge, which means California may suffer more than 1,000 disinvestment events this year.

The capital directed to out-of-state or out-of-country, while difficult to calculate, is nonetheless in the billions of dollars. The top five destinations are (1) Texas, (2) Arizona, (3) Colorado, (4) Nevada and Utah tied; and (5) Virginia and North Carolina tied.

Based on the legislature’s recent rejection of business-friendly legislation and Sacramento’s implementation of additional regulations, signs are that California’s hostility towards business will only worsen. California is such fertile ground that representatives for economic development agencies are visiting companies to dissect our high taxes, extreme regulatory environment and other expenses to show annual savings of between 20 and 40 percent after an out-of-state move."

'All My Children" may be off the air, but the soap opera is still running in Sacramento. In the latest installment, Governor Jerry Brown divorced his fellow Democrats by vetoing their budget. Democrats and unions are furious and plotting revenge, while both sides blame the evil Republicans for refusing to sanction a referendum that would give voters a chance to endorse a tax increase.

Where's Susan Lucci when you need her?

Mr. Brown deserves credit for vetoing the Democratic budget that reverted to Sacramento form to close a $9.6 billion deficit, deferring several billion dollars of bills into the future, borrowing from special funds, and raising the state's sales tax and vehicle registration fee without the constitutionally required supermajority vote. Even the Democratic treasurer warned that the state couldn't finance its short-term debt with such a risky plan, and Mr. Brown cashiered it.

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Associated PressCalifornia Gov. Jerry Brown

Democrats are now blasting him for suggesting that an "all cuts" budget is the only alternative if Republicans won't agree to allow a vote on a five-year extension of what was supposed to be a temporary income tax surcharge, among other tax hikes. Democrats are frustrated because they expected Republicans to cave months ago. But Republicans have shown laudable discipline, and they know that their relevance in state politics hinges on extracting concessions from employee unions that will reduce the future cost of government.

Mr. Brown needs at least two GOP votes in each chamber to put the tax increases on the ballot. And Republican lawmakers have said for months that they're willing to do so in return for modest pension and regulatory reforms and a hard spending cap.

For instance, they want to cap annual pension benefits at $106,000 per employee. Yup, state workers could still earn a six-figure annual pension from retirement to death. Republicans also want new state workers—not current employees—to have the option of a hybrid pension that includes a less generous defined benefit portion as well as an employer-matched defined contribution plan. That proposal is scaled back from the recommendation of the state independent oversight commission to freeze benefits for current workers and to move everyone into hybrid plans.

Republican lawmakers tell us that Democrats won't agree to a deal unless the government-worker unions give their blessing. But the unions now don't want a special election since recent polls show public support for the tax extensions waning, particularly in light of the state's recent discovery of $6.6 billion in additional revenue as the economy recovers. The unions would rather conserve their resources for the 2012 legislative races in which they hope to elect a Democratic supermajority. Their plan is to postpone dealing with California's budget problems until Democrats can raise taxes without making concessions.

Two other liberal hothouses, New York and New Jersey, are at least trying to clean up their fiscal messes, but the unions that dominate Sacramento think taxpayers will finance their soap opera forever. If Mr. Brown wants his return as Governor to be more than a bad last act, he'll abandon his tax increase hopes and do the hard work he promised to shape up state government.

Last week was another somewhat depressing chapter in a now long saga of living where I was born. I returned to the farm from leading a European military history tour, and experienced the following — mind you, after a number of thefts the month prior (barn, shop, etc.):

1) I left my chainsaw in the driveway to use the restroom inside the house. Someone driving buy saw it. He slammed on the brakes, stole it, and drove off. Neat, quick, easy. Mind you there was only a 5-minute hiatus in between my cutting. And the driver was a random passer-by. That suggests to me that a high number of rural Fresno County motorists can prove to be opportunistic thieves at any given moment. The saw was new; I liked it — an off-the-shelf $400 Echo that ran well. I assume it will be sold off at a rural intersection in these parts, or the nearby swap meet for about $60. I doubt the thief was a professional woodsman who needed a tool of the trade to survive.

2) On the next night, three 15-hp agriculture pumps on our farm were vandalized — all the copper wire was torn out of the electrical conduits. The repairs to each one might run $500; yet, the value of the wire could not be over $50. I was told by neighbors that reports and descriptions of the law-breakers focused on youthful thieves casing the countryside — in official parlance a “gang,” and in the neighborhood politically-incorrect patois “cholos” — like the fellow who recently drove in, in his new lowered shiny red pickup (hydraulic lifters are not cheap), inquiring about buying “scrap” and “just looking” before I ran him out.

3) A neighbor has a house for sale. It is unoccupied and rather isolated. I saw someone approach it on Friday, and drove over to ensure he was lawful. It was the owner’s assistant, who lamented that someone had just stolen all the new appliances out of the house — carting off the refrigerator, dishwasher, stove, and microwave. But why? Do these miscreants wish a civilization of the sort that all houses must seem occupied all the time, or are otherwise considered “communal property” for the taking? Don’t the appliance thieves have homes, and if so, do they have locks on the doors to protect their investments from the likes of themselves?

These days I sympathize with gloomy St. Augustine, writing after the sack of Rome in 410, and then again contemplating things lost when back home, near death, and besieged by the vandals at Hippo Regius. He died I think convinced that a millennium of culture was about to end. And despite a Belisarius to come, it did.

Reflections on the Redistributive State

I think the public would react in two different ways to the above occurrences — and such a dichotomy explains a lot why the nation has never been more divided.

A majority would believe the thieves took things for drugs, excitement, or to buy things like an iPhone or DVD, rather than out of elemental need (e.g., the thief hawked the chainsaw to purchase the family’s rice allotment for the week). In this view, contemporary American crime arises not so much then from Dickensian poverty, as we see in South America or Africa, but out of a sense of resentment, of boredom, from a certain contempt for the more law-abiding and successful, or on the assurance that apprehension is unlikely, and punishment rarer still. After all, Hollywood, pop music, the court system, and the government itself sympathize with, even romanticize those forced to take a chainsaw, not the old middle-class bore who bought it.

The remedy to address theft would be not more government help — public assistance, social welfare, counseling — but far less, given that human nature rises to the occasion when forced to work and sinks when leisured and exempt. I don’t believe my thieves have worked much; instead, they figured a day’s theft beats tile setting or concrete work beginning at 5 AM.

I conclude that most Americans would agree that chain-sawing a peach tree or pumping irrigation water enriches the nation, while cruising around looking to destroy such activity does not. The latter represents the sort of social parasitism that I read about each Saturday night in our environs (and, in terms of illegal immigration, once wrote about in Mexifornia — a book I seem doomed to relive in Ground Hog fashion each day — nearly a decade ago): gangbanger A shoots up gangbanger B; B goes to emergency room for publicly funded $250,000 worth of surgery and post-op treatment by C, an MD, who otherwise would have been insulted and intimidated by A or B should he have met either earlier in the day. Indeed, C is more likely to be ridiculed or sued by B than thanked. And yet C does not need either A or B; both need the former in extremis.

Where does this all end — these open borders, unsustainable entitlements and public union benefits and salaries, these revolving door prisons and Al Gore-like energy fantasies?

We are left with a paradox. The taxpayer cannot indefinitely fund the emergency room treatment for the shooter and his victim on Saturday night if society cannot put a tool down for five minutes without a likely theft, or a farmer cannot turn on a 50-year old pump without expecting its electrical connections to have been ripped out. Civilization simply cannot function that way for either the productive citizen or the parasite, who still needs a live host.

I will make a wild leap and suggest that a vast majority of Americans are reaching the point where they accept that the blue statist paradigm is reaching its logical end and simply cannot go on any more, given that it is antithetical to human nature itself. There is not always a Germany for every Greece. Let me offer a few examples:

In the American Southwest, open borders, unassimilated illegal immigrants, ethnic and tribal chauvinism predicated on racial solidarity (after all, La Raza, Inc. is not complaining about the deportation of the Korean or Ugandan who overstays his visa or agitating for an open immigration policy with Kenya), a culture of grievance and complaint, all embedded in a contempt for federal law — all that leads to enclaves that resemble more the country abandoned than sought out. In other words the entire therapeutic vision of illegal immigration would lead to a society to which illegal immigrants would not wish to flock. Only assimilation, intermarriage, integration, legality, mastery of English, and acceptance of American culture would ensure the continuance of the sort of society which future illegal aliens would wish to cross into.

The same is true of unions, pensions, and compensation. Highly paid and pensioned California teachers and professors are resembling bishops, knights, or rooks surrounded by a host of part-time, temporary, one-year-contract pawns, lacking the salary, security, and benefits of the kingpins. Yet the liberal establishment in education cannot continue in such an apartheid world of unionized winners and exploited subordinate losers, or public fiefdoms propped up by private toilers. It is a contradiction in terms, and there is no money to pay for it, despite the fiscal logic of its exploitation. The logical conclusion to the blue state would be a handful of six-figured union grandees surrounded by a sea of part-time lackeys (sort of like the CSU system with its blue-chip administrators and tenured faculty propped up by legions of part-time lecturers). Note the surrealism of the European unrest: who are the “they” who “stole” the money that is now no longer there to fund socialism? Did not the socialists at last get what they wanted? The “they” who used to fund it by expanding the economy disappeared a long time ago and now are in the graveyards of Europe.

I went to the warehouse local food store the other day, soaked it all in, and wondered: if everyone is on food stamps (actually computerized government plastic credit cards designed to avoid the old stigma of pulling out a coupon), are there still food stamps? We are nearing 50 million recipients. So what will come next? Food stamp A; food stamp category B? Super food stamps? Can 100 million receive them? 150?

Our California prison system is said to be letting out 30,000-40,000 criminals. If all the court rulings mandating libraries, counseling, second medical opinions, legal help, etc., coupled with the cost of a unionized, highly compensated guild of guards, make prison too expensive, then will we be left with virtual prisons in which trials and sentencing are followed by freedom? If it is cheaper each year to send the felon to UCLA or even Stanford, why then have a prison — a new metaphor for almost everything gone wrong with contemporary American society?

This liberal notion of being careful of what you wish for extends to energy. If Obama promised “skyrocketing” energy prices, and to “bankrupt” coal, and has discouraged almost all new fossil fuel production (a great wonder of the age is how private enterprise keeps finding new gas and oil reserves despite the discouragement of the government), why then he is worried about $4 a gallon gas? Is not $4 or $5 gas the point?

It is near $10 in Europe. So why not soon here the same? If the university president cannot afford to drive his Lexus to campus, if the trial lawyer cannot take his Mercedes to Yosemite, if the professor’s Volvo is too expensive to drive to the postmodern lit conference, have we reached nirvana or chaos?

Watching the tastes, the behavior, the rhetoric, the appointments, and the policy of this administration suggests to me that it is not really serious in radically altering the existing order, which it counts on despite itself. Its real goal is a sort of parasitism that assumes the survivability of the enfeebled host. That does not mean it has not done a lot of damage and will not do even more in the next two years; only that it never quite wanted to see cap and trade legislation enacted, blanket amnesty, Guantamo shut down, or Predators ended; these were simply crude slurs by which to demonize Bush, ways of acquiring power and influence, but not a workable plan of living. Note that Obama is now zealous on just those issues which he could have easily rammed through his Democratically controlled congress in 2009-10 when he had large majorities, such as amnesty and cap and trade.

You cannot fly to Costa del Sol on solar panels. The light switches might not go on at Vail without coal burning somewhere. The Holder or Obama children might not be safe in the Stockton or Parlier city schools. Some right-wing nut in the Dakotas is still necessary to pump the oil to refine the gas for Air Force One; there is no golf without an irrigation system and a supply of either ground or surface water.

In short, the currently insulted class is necessary and Obama knows it.

If I were not flying economy today for eight hours to speak on the other side of the country, and did not write this reflection, cramped up on the plane, there would soon be no more chainsaws or copper wire for the oppressed in my region to steal.

Riverside County Supervisor Jeff Stone ... said in a statement late Thursday that Riverside, Imperial, San Diego, Orange, San Bernardino, Kings, Kern, Fresno, Tulare, Inyo, Madera, Mariposa and Mono counties should form the new state of South California.

The creation of the new state would allow officials to focus on securing borders, balancing budgets, improving schools and creating a vibrant economy, he said.

“Our taxes are too high, our schools don’t educate our children well enough, unions and other special interests have more clout in the Legislature than the general public,” Stone said in his statement.

But only if they take Los Angeles with them. Getting out from under the nitwits in San Francisco (and don't get me started on Marin) would be a major plus.

NEW YORK (CNNMoney) -- Buffeted by high taxes, strict regulations and uncertain state budgets, a growing number of California companies are seeking friendlier business environments outside of the Golden State.

And governors around the country, smelling blood in the water, have stepped up their courtship of California companies. Officials in states like Florida, Texas, Arizona and Utah are telling California firms how business-friendly they are in comparison.

Companies are "disinvesting" in California at a rate five times greater than just two years ago, said Joseph Vranich, a business relocation expert based in Irvine. This includes leaving altogether, establishing divisions elsewhere or opting not to set up shop in California.

"There is a feeling that the state is not stable," Vranich said. "Sacramento can't get its act together...and that includes the governor, legislators and regulatory agencies that are running wild."

The state has been ranked by Chief Executive magazine as the worst place to do business for seven years.

I am profoundly disappointed to hear that. Huey made a real effort and there were LOTS of yard signs for him and a lot of hard work by his team. This is a real disappointment. The Dem winner is a second or third generation LA Dem hack.